Shares of casino operators got a big boost Monday, after Macau officials announced that an easing of the post-COVID travel restriction policy would begin in the coming weeks.
News surfaced over the weekend that Macau was OK’d to resume issuing electronic visas for individuals and tour groups around late-October to early-November. J.P. Morgan analyst Joseph Greff said that would be the “first meaningful” easing of travel restrictions to the gambling center since the start of the COVID-19 outbreak.
“This positive development isn’t something the industry or investors were expecting and so we look at this policy news as [a] sizable positive for a sector that has been viewed as very tough to invest in by the buy-side,” Greff wrote in a note to clients, for two key reasons:
“Miserable” near-term operating environment in which recent gross gaming revenue run rates are only about 10% of pre-pandemic levels.
The lack of anyone’s ability to reasonably predict when travel mobility would start improving between mainland China, Hong Kong and Macau.
Shares of Wynn Resorts Ltd.
shot up 12.7% to pace the gainers in the S&P 500 index
and Las Vegas Sands Corp.’s stock
surged 12.4% to place second in the benchmark index.
Greff said that although the e-visa news is positive for all Macau-centric stocks, he likes Las Vegas Sands (LVS) the best, as he views it as a play, not just for the Macau recovery, but also for expected estimate increases for its Marina Bay Sands property in Singapore.
“We’d expect incremental capital return as both of its markets experience a recovery (something that should distinguish LVS from the others),” Greff wrote.
For the second quarter, LVS reported total Macau-based revenue of $374 million, or 35.8% of total revenue, while revenue from the Marina Bay Sands total $679 million. For Wynn, total Macau operations revenue was $117.2 million for the quarter, or 12.9% of total revenue, while MGM’s China revenue of $143.0 million was 4.4% of total revenue.
“Of course, there likely will be fits and starts with COVID outbreaks, but this news has to be a positive for a sector that has experienced massive multiyear underperformance where sentiment can be described as negative to apathetic,” Greff wrote.